How to Fix Detroit

It will cost bondholders dearly, but Motown has a shot at a second chance. Inside the turnaround effort.

Four years ago, Dan Gilbert moved his highly successful online mortgage lender, Quicken Loans, from suburban Livonia, Mich., to the new Compuware Building in downtown Detroit. The billionaire, 52, has since invested some $1.5 billion to buy and rehab more than 40 buildings in downtown and nearby Greektown. The buildings, many of which sat half-empty for more than a decade, now house 12,000 of his employees, as well as a growing number of retailers, hip restaurants, and tech outfits, some of which have been incubated by a unit of...